Nécrologie du Bitcoin

The best ana­lo­gy, although not per­fect, for the demise of bit­coin vs. Ethe­reum and the other unli­mi­ted blo­ck­chain tech­no­lo­gies being deve­lo­ped for com­mer­cial appli­ca­tion is that of the expe­rience of digi­tal audio tapes (DATs) vs. the com­pact disk tech­no­lo­gy of the mid-1980s.

Bit­coin will soon be dead, claims David Yer­mack, chair­man of the Finance Depart­ment at NYU’s Stern School of Busi­ness. He blames the demo­cra­tic pro­cess of deci­­sion-making in the Bit­coin com­mu­ni­ty for the cryptocurrency’s pro­blems.

Still, based on recent deve­lop­ments, a bit­coin resur­gence looks like a long shot. When the final his­to­ry of bit­coin is writ­ten, the cur­ren­cy itself is like­ly to be just a color­ful foot­note in the tale of the emer­gence of a power­ful new blo­ck­chain tech­no­lo­gy.

The digi­tal cur­ren­cy is on the “brink of tech­ni­cal col­lapse,” he wrote, and “as a result there’s no lon­ger much rea­son to think Bit­coin can actual­ly be bet­ter than the exis­ting finan­cial sys­tem.

There was a time when belie­vers in bit­coin, the vir­tual cur­ren­cy backed by math ins­tead of any govern­ment, thought that it might one day replace cash as a rela­ti­ve­ly ano­ny­mous way to pay for eve­ry­thing from gro­ce­ries to your mor­ning cof­fee.

Now, that dream might be smack dab in the mid­st of cra­shing down, a func­tion of the currency’s code playing out. At stake is nothing less than two com­pe­ting visions for the future of bit­coin itself.

“We know that bit­coin itself is a com­plete fai­lure and shows the num­ber one law of pro­gram­ming and soft­ware : that any­thing that can be pro­gram­med can be hacked. So nothing is com­ple­te­ly secure,” said Willem Bui­ter, Citi’s chief eco­no­mist and for­mer mem­ber of the Bank of England’s rate-set­­ting com­mit­tee”

…the Bit­coin fai­lure does illus­trate that human ins­ti­tu­tions must have poli­tics in addi­tion to tech­ni­cal exper­tise. Try to engi­neer around poli­tics, and it will flood back in the most ata­vis­tic and uns­cru­pu­lous forms.

Let’s also bear in mind what it is that makes some ven­ture capi­ta­lists Bit­coin zea­lots : pure greed. That is the rea­son clea­rest to me for Bitcoin’s fai­lure. Inten­ded as a level playing field and a more effi­cient tran­sac­tion sys­tem, the Bit­coin sys­tem has dete­rio­ra­ted into a fight bet­ween inter­es­ted par­ties over a pool of money. In the begin­ning, Bit­coin was a noble expe­riment. Now, it is a dis­trac­tion. It’s time to build more ratio­nal, trans­pa­rent, robust, accoun­table sys­tems of gover­nance to pave the way to a more pros­pe­rous future for eve­ryone.

From the start, I’ve always said the same thing : Bit­coin is an expe­riment and like all expe­ri­ments, it can fail. So don’t invest what you can’t afford to lose.I’ve said this in inter­views, on stage at confe­rences, and over email. So have other well known deve­lo­pers like Gavin Andre­sen and Jeff Gar­zik.

But des­pite kno­wing that Bit­coin could fail all along, the now ines­ca­pable conclu­sion that it has fai­led still sad­dens me great­ly. The fun­da­men­tals are bro­ken and wha­te­ver hap­pens to the price in the short term, the long term trend should pro­ba­bly be down­wards. I will no lon­ger be taking part in Bit­coin deve­lop­ment and have sold all my coins.

Nick walks Ben through what exact­ly Bit­coin is, ans­we­ring whe­ther the plat­form is real­ly a finan­cial oppor­tu­ni­ty of his­to­ric pro­por­tions, the mas­sive cri­mi­nal pro­blem law enfor­ce­ment offi­cials have sug­ges­ted, or some­thing else enti­re­ly : a waste of everyone’s time and money. He also out­lines some of the desi­gn flaws he sees in Bit­coin and why those flaws, which many in the Bit­coin com­mu­ni­ty view as impor­tant fea­tures, will actual­ly lead to the platform’s even­tual down­fall.

It’s a dis­cus­sion of Pon­zi schemes, the limits of the blo­ck­chain, and the future of inter­na­tio­nal cur­ren­cy tran­sac­tions.

So spare a thought for the com­pa­nies scrab­bling to jump off the bit­coin ship before it sinks. The currency’s value has been sta­tic for months (except for a brief boom and bust in ear­ly Novem­ber when it was caught up in a Chi­nese pon­zi scheme), but per­haps more dam­nin­gly still, the hype has all but disap­pea­red.

Bit­coin is a non-thing. It will never be able to have an inde­pendent, sove­rei­gn value on its own, because it is a non-thing, just like all cur­ren­cies in the world today are non-things, inclu­ding the (tem­po­ra­ri­ly) Almigh­ty Dol­lar, which became an abso­lute non-thing pre­ci­se­ly on Sun­day, August 15, 1971.

The crea­tors and pro­mo­ters of the Bit­coin are per­haps acting in good faith, but they are indi­vi­duals enthral­led with tech­no­lo­gy. The Bit­coin may indeed be a tech­no­lo­gi­cal mar­vel, but the crea­tors and pro­mo­ters of the Bit­coin do not unders­tand money, and they do not unders­tand that the crea­tion of money can­not be accom­pli­shed by tech­no­lo­gy, no mat­ter how sophis­ti­ca­ted it may be. The igno­rant public of today is also bewit­ched by the mar­vels of tech­no­lo­gy and has been tho­rough­ly decei­ved by false eco­no­mists about what money is and must be, and this opens the way for such fan­ta­sies as the Bit­coin.

I stand by my opi­nion that the Bit­coin is, in fact if not in inten­tion, a fraud ; it is an attempt to muscle-in on the enor­mous scam of uni­ver­sal fiat money, which is a curse upon man­kind. And as a scam, it will go to the dust-bin of His­to­ry, along with the world’s present fiat money sys­tem.

Intui­ti­ve­ly, bitcoin’s short­co­mings as a cur­ren­cy thus far would stem from issues like the absence of govern­ment backing, low inter­est from the broa­der public and high vola­ti­li­ty. Weber approa­ched it from a dif­ferent angle, essen­tial­ly saying that bit­coin can­not by prin­ted by govern­ments in times of need- a moral­ly repu­gnant notion for many hard­line Bit­coi­ners.

“Pri­vate cur­ren­cies will fail to take off because there is no len­der of last resort- there will always be boom and bust,”

Although Bit­coin prices moved above $400.00 this week, ano­ther crash in the Bit­coin mar­ket is on the hori­zon. Inves­tors are get­ting bul­lish on Bit­coin this week, but the rea­sons make no sense. In fact, the entire pre­mise of Bit­coin mining is dee­ply fla­wed….

No mer­chant will risk accep­ting Bit­coin if it can’t be trans­fer­red back into their own cur­ren­cy. Even if they could pay their gro­ce­ry bill, rent, and uti­li­ties using Bit­coin, there’s still the small mat­ter of taxes. Ulti­ma­te­ly, cen­tral banks need the autho­ri­ty to ease the pain of busi­ness cycles. That’s why Bit­coin is no more than a Liber­ta­rian pipe dream.

Spea­king at the For­tune Glo­bal Forum, Dimon said people were was­ting their time with digi­tal cur­ren­cies such as bit­coin.

He added :

“This is my per­so­nal opi­nion, there will be no real, non-control­­led cur­ren­cy in the world. There is no govern­ment that’s going to put up with it for long … there will be no cur­ren­cy that gets around govern­ment controls.”

“I’ll be sur­pri­sed if bit­coin is here in five years,” he has told For­tune. “The value of bit­coin isn’t the cur­ren­cy, but the tech­no­lo­gy. I think once the world becomes more accus­to­med and attu­ned to the plat­form of bit­coin, the noise will go away, and the cur­ren­cy will go away too. The real trans­for­ma­tion is the idea of taking all bar­riers down… Wha­te­ver cur­ren­cy or com­mo­di­ty you want to tran­sact in, you can, and you can do it for free.” (Uphold charges a fee for cre­dit and debit card depo­sits, and for with­dra­wals above a cer­tain amount.)

Minor, too, pre­dicts that bit­coin as a cur­ren­cy “will get des­troyed.”

For­tu­na­te­ly, it’s unli­ke­ly that Bit­coin will sur­vive long enough to gene­rate the envi­ron­men­tal disas­ter that would arise if it became a major part of the finan­cial sys­tem. The same desi­gn fea­ture that requires the use of so much elec­tri­ci­ty is the fatal flaw in Bit­coin as a cur­ren­cy.

That was the ques­tion posed during a Sept. 21 panel at Tech Crunch Dis­rupt – a confe­rence in San Fran­cis­co, as Bit­coin pro­po­nents spe­cu­la­ted on the digi­tal currency’s lack­lus­ter per­for­mance for ven­ture capi­ta­lists and whe­ther it would ever see a come­back.

It does not solve a single pro­blem that anyone, anyw­here has – unless you are a cri­mi­nal and need an ano­ny­mous cur­ren­cy to pay or be paid. That is bitcoin’s most pre­vai­ling use case. It’s not a sub­sti­tute for cash digi­tal­ly, and it’s not a solu­tion for deve­lo­ping eco­no­mies. There is no busi­ness case anyw­here for a glo­bal cur­ren­cy that usurps any cen­tral bank autho­ri­ty to manage its fis­cal poli­cy through the use of its cur­ren­cy. Abso­lu­te­ly none….

Here’s more proof that bit­coin as a method of conduc­ting com­merce is on life sup­port. Bit­pay, one of the lar­gest and most well-fun­­ded bit­coin pro­ces­sors,repor­ted­ly laid offmost of its remai­ning employees last week in an effort to “keep pace with bitcoin’s growth.”Which, based on this news, seems to be movingin the wrong direc­tion.

So, can we agree to move time, ener­gy and brain cells away from bit­coin as an alter­na­tive cur­ren­cy ? And to disen­tangle the tech­no­lo­gy of the blo­ck­chain away from it, too ?

We have yet to see any mea­ning­ful adop­tion in the retail world and the ins­ti­tu­tio­nal world seems quite luke­warm.… The defla­tio­na­ry qua­li­ty of [Bitcoin](https://99bitcoins.com/) – by desi­gn and not by acci­dent – is a major draw­back. Defla­tion natu­ral­ly encou­rages hoar­ding and delays spen­ding, which is the beha­vior we are wit­nes­sing with BTC hol­ders.

In light of the above ana­ly­sis, Bitcoin’s power usage per tran­sac­tion isn’t remo­te­ly sus­tai­nable as a who­le­sale repla­ce­ment for the conven­tio­nal finan­cial sys­tem. In the future, Bit­coin could mas­si­ve­ly gain popu­la­ri­ty, pile on mil­lions more tran­sac­tions, and still be unsus­tai­nable due to the arms race bet­ween miners.

It’s not clear what Bit­coin is or what it will be, but it is clear what it’s not. It’s not a cur­ren­cy. People don’t set prices in Bit­coin and, for the most part, don’t buy things with it either…. In the mean­time, though, Bit­coin is still a lit­tle bit of a Ponzi—or is it a pyramid?—scheme that its liber­ta­rian ear­ly adop­ters are trying to cash in on.

I don’t think Bit­coin is the cor­rect tech­no­lo­gy to build these sorts of ideas on. I unders­tand and stron­gly sym­pa­thize with the desire to move to decen­tra­li­zed sys­tems and plan on even­tual­ly wor­king in that space myself, but bet­ween Bitcoin’s effi­cien­cy pro­blems and poor tole­rance of net­work par­ti­tions, I do not think it’s sui­table as a gene­ral pur­pose glo­bal decen­tra­li­zed data­base in the way people want to use it.

Bit­coin, at its core, is an attempt to solve big socioe­co­no­mic pro­blems through tech­no­lo­gy. But so long as it remains an overw­hel­min­gly male domain, it’s going to conti­nue to concen­trate on the eco­no­mic pro­blems, while mis­sing the big social pro­blems. Which means that it’s going to conti­nue going now­here.

“I’ll be sur­pri­sed if bit­coin is here in five years,” he said. “It’s a means to an end. The value of bit­coin isn’t the cur­ren­cy, but the tech­no­lo­gy. I think once the world becomes more accus­to­med and attu­ned to the plat­form of bit­coin, the noise will go away, and the cur­ren­cy will go away too. The real trans­for­ma­tion is the idea of taking all bar­riers down and having it be ubi­qui­tous. Wha­te­ver cur­ren­cy or com­mo­di­ty you want to tran­sact in, you can, and you can do it for free. That’s pret­ty revo­lu­tio­na­ry.”

The price of Bit­coin lost most of its value since its para­bo­lic rise and spe­cu­la­tors have lost a lot of money. The next elec­tro­nic pay­ment tech­no­lo­gy will be very large. We eager­ly await the next ver­sion of elec­tro­nic money to appear.

Never­the­less, the chances of bit­coin, the most popu­lar of this new breed of self-clea­­ring finan­cial ins­tru­ments, making it as a mains­tream cur­ren­cy are now zero. Prices have been floun­de­ring at around $350 a coin for months, esca­la­ting losses for those who inves­ted at last year’s $1,200 highs. Add to this a stream of high-pro­­file scan­dals over the past year, such as the col­lapse of Tokyo-based cur­ren­cy exchange Mt Gox in Februa­ry, and you rea­lise it is not a ques­tion of if but when the public loses inter­est in this expe­riment enti­re­ly.

It doesn’t take a genius to rea­lize that if a Bit­coin futures mar­ket is imple­men­ted, in the Uni­ted States and Europe, the large spe­cu­la­tors with ban­krolls in the bil­lions, will be more than hap­py to turn bit­coin into ano­ther crude oil-style pump-and-dump. In the case of Bit­coin, the vola­ti­li­ty will kill any chance bit­coin ever had of beco­ming a medium of exchange.

Bit­coin will fail, not for fans lack of trying, but rather its sta­tus will never be more than an inter­es­ting concept cham­pio­ned by those in the techie or liber­ta­rian camp. Hol­ding Bit­coin is more of a poli­ti­cal expres­sion rather than a sound eco­no­mic invest­ment.… Ulti­ma­te­ly, Bit­coin will be rele­ga­ted to the his­to­ry books unless struc­tu­ral changes are made. It will never be ful­ly adop­ted in its cur­rent form, being nothing more than a neat concept for people to lose money on.

“It’s not a cur­ren­cy now, it’s a pre­tend cur­ren­cy,” Robin­son said. “It does not qua­li­fy or satis­fy the requi­re­ments for a modern cur­ren­cy. The pro­blem with dis­rup­tive tech­no­lo­gies is that the dis­rup­ted has some­thing to say about it. I say 10 years from now we will all have digi­tal cur­ren­cies – fiat cur­ren­cies – and bit­coin will be remem­be­red pro­ba­bly much like Pogs and Sinclair’s C5.”

One of the signs that Bit­coin is dying is that hard­ly anyone actual­ly uses the cur­ren­cy.… The Bit­coin net­work is fading away and the price is des­ti­ned to conti­nue its down­ward march. This is like­ly to be the last year people take Bit­coin serious­ly (if last year wasn’t alrea­dy). Whe­ther Bit­coin disap­pears with a bang or a whim­per, the end is coming.

At this point, it’s mere­ly a spe­cu­la­tive com­mo­di­ty, just like tulip bulbs cen­tu­ries ago or even Bea­nie Babies more recent­ly.… Bit­coin has pea­ked and is very unli­ke­ly to esca­late signi­fi­cant­ly in value again.… It’s basi­cal­ly an ela­bo­rate Pon­zi scheme.… While I don’t relish anyone losing money, Bit­coin basi­cal­ly went out of the way to make itself vul­ne­rable. For this rea­son, it is des­ti­ned to fail.

Even if the price of Bit­coin doesn’t go to zero, the chances the Bit­coin com­mu­ni­ty convin­cing the wider public, govern­ments, and indus­try that Bit­coin real­ly repre­sents the future of the world’s digi­tal eco­no­my will become extre­me­ly unli­ke­ly.… this grand tech­no­lo­gi­cal expe­riment may have run its course.

The Swiss Franc might be the cur­ren­cy get­ting all the atten­tion, but the real blood bath is in Bit­coin. Remem­ber how Bit­coin was sup­po­sed to change eve­ry­thing ? And the dol­lar was dead ? Boy, was that ever wrong.… Some are sug­ges­ting that the pre­ci­pi­tous decline in the cur­ren­cy is pro­ba­bly its death knell.

Bit­coin is pro­ving a big disap­point­ment.… There’s almost cer­tain­ly more bad news to come. The elec­tro­nic token has lots of endu­ring pro­blems. As a store of value that is not sub­ject to govern­ment inter­ven­tion, it lacks the sup­port of autho­ri­ties and is always in dan­ger of being ban­ned.… Defen­ders of Bit­coin have not given up hope. Their empha­sis has shif­ted though, from the cur­ren­cy to the under­lying blo­ck­chain pro­ces­sing soft­ware.… But it will not bring up the price of Bit­coin.

Bit­coin the cur­ren­cy may be dying, but it doesn’t mat­ter.… Cer­tain­ly, a trend line from Novem­ber 2013 to now, extra­po­la­ted for­wards, inter­sects worth­less­ness some­time later this year.… This could create a nega­tive feed­back loop as miners retire, the net­work becomes less secure and resi­lient, inves­tors lose faith, and the price drops fur­ther.

Bit­coin isn’t going to replace any fiat cur­ren­cies as long as it feels intui­ti­ve­ly safer for most people to keep their savings in a bank account ins­tead of in a digi­tal wal­let.… This brings us to the cur­rent cri­sis in Bit­coin : far from wides­pread adop­tion giving it resi­lience and relia­bi­li­ty, the sys­tem may be star­ting to fall apart.… These issues add up to what we’re seeing now – the slow, inexo­rable decline in the price of a digi­tal cur­ren­cy with no value beyond the trust in the sys­tem.

If Bit­coin were a cur­ren­cy, it’d be the worst-per­­for­­ming one in the world, worse even than the Rus­sian ruble. But Bit­coin isn’t a cur­ren­cy. It’s a Pon­zi scheme for redis­tri­bu­ting wealth from one liber­ta­rian to ano­ther.… But in the long run, we’re all dead, and Bit­coin might be too.

The vir­tual cur­ren­cy is loo­king increa­sin­gly belea­gue­red, and its price had been drop­ping stea­di­ly in recent months.… It is a remin­der of the secu­ri­ty issues that face any vir­tual cur­ren­cy see­king mains­tream adop­tion, and it brings back memo­ries of the infa­mous exchange Mt. Gox.… Com­bi­ned with bitcoin’s repu­ta­tion as an enabler for cri­mi­nal acti­vi­ty, it is like­ly this public-image pro­blem is hin­de­ring mains­tream adop­tion. As one com­men­ter on the dis­cus­sion board Hacker News remarks, bit­coin is an “even worse” invest­ment than gold.

Even if the price of Bit­coin doesn’t go to zero, the chances the Bit­coin com­mu­ni­ty convin­cing the wider public, govern­ments, and indus­try that Bit­coin real­ly repre­sents the future of the world’s digi­tal eco­no­my will become extre­me­ly unli­ke­ly.

We’ll sign off with the simple point that unless a mas­sive amount of new capi­tal is trans­fer­red into Bit­coin mar­ket shar­pish — which is not impos­sible, since there are still a num­ber of deep pocke­ted belie­vers out there — it’s hard to ima­gine the asset class going any other way but south. Fur­ther­more, it’s unli­ke­ly at this stage that either price rig­ging, mining car­tels or lower ener­gy costs will be able to reverse that trend.

And that Bit­coin could only sur­vive at the mar­gins, where it would be iso­la­ted, and in no posi­tion to threa­ten Visa or Mas­ter­card, or the under­lying pay­ment and mes­sa­ging ser­vices that under­pin the world finan­cial sys­tem as it stands today. Then there’s The Oracle of Oma­ha who has one four let­ter word for bit­coin – joke.